Qualité du service offert par les auditeurs et clauses restrictives

Translated title of the contribution: Auditor quality and debt covenants

Ashok Robin, Qiang Wu, Hao Zhang

Research output: Journal article publicationJournal articleAcademic researchpeer-review

16 Citations (Scopus)

Abstract

This study examines the impact of auditor quality on financial covenants in debt contracts. We conjecture that high-quality auditors have two related effects on these debt covenants: (i) they encourage fewer and less restrictive covenants by providing assurance to lenders at contract inception and, consequently, (ii) they ensure a lower probability of eventual covenant violations. Consistent with the conjectures, we find that auditor quality is negatively associated with the intensity and tightness of financial covenants. Specifically, high-quality auditors are associated with fewer covenants (especially performance covenants) and less binding covenants. Additionally, we find that auditor quality is negatively associated with the likelihood of covenant violations. In an ancillary test, we provide evidence that high-quality auditors mitigate the detrimental effect of covenant violations on the cost of borrowing. Together, these findings highlight the important role of auditors in debt contracting.

Translated title of the contributionAuditor quality and debt covenants
Original languageFrench
Pages (from-to)154-185
Number of pages32
JournalContemporary Accounting Research
Volume34
Issue number1
DOIs
Publication statusPublished - 1 Mar 2017
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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